kick his ass

Your brother is a doucebag.

If your brother is willing to try to permanently ruin your life over you refusing to loan him money, I would seriously suggest cutting him out of your life at this point. I would also recommend that you try to find (and show your wife) proof of you refusing that loan last month, to back up what you are saying to her. If he confessed in writing (text, email, instant message) to you, even better. If possible, you can also try to get the ISPN from which the Craigslist ad was posted. I'm not sure what their policy is, but they may be willing to help you with it if it's not immediately accessible in the post's details. Now given your brother was almost certainly NOT at your house when it was put up there, and those are unique to the specific access point. If it doesn't match yours, there's your proof right there that you are being set up. Better still if you can match it to your brother's; for example, if he has a wifi network that you can ping to access his unique number(from outside his house if necessary, from inside if he will let you in, even under false premises),and you can match the one from the post to HIS to back up your case!

How would he even be able to find that ad if he wasn't looking for casual sex on craigslist? This could easily be thrown back in your brother's face.

your wife's not very rational. your brother just happened to be on men seeking women ads on Craigslist?

On one hand, that sucks. On the other hand, help your brother out next time.